11 April 2019 | Garrie McKinnon
How Technologies Transform the Insurance Industry
I attended two insurance conferences in London this month in order to gain insight into what is driving the changes in their business. Insurance companies are all looking at technology as a way to improve the efficiency of their operations, but they all know that technology alone will not make a sufficient impact. Data is an organization’s biggest asset and the ability to use technology to harness that data and gain insights to better serve customer needs is also the key to successfully moving a business forward.
Closer Connection with Clients
Traditionally insurers have limited contact with their customers – especially if the client came via a broker. Even customers acquired directly will normally pay their premium to cover a risk (car, house, life etc.) and only then have contact if making another payment at renewal or making a claim. Both of these follow-on contacts are generally negative. The renewal invariably involves increased cost, which pushes the client to look elsewhere for a cheaper premium. In the case of a claim, the customer often has to prove that their claim is legitimate, therefore putting them in a confrontational position with their insurer. Companies are looking at ways to make claims more straightforward while remaining vigilant regarding fraudulent activity.
Health Insurance is an area in which some companies are working on closer contact with their clients and a more interactive relationship. It is starting to have positive outcomes. An example is Vitality, which offers incentives for clients to have a more active lifestyle in return for vouchers toward partner services. The premise is that healthier clients means fewer claims so everybody wins.
Life Insurance companies are looking at hybrid contact models in which human interaction is still preferred when purchasing life insurance, but supported by software tools and data to make the process more friendly yet efficient. People want to have absolute trust in their Life Insurer, mainly because at the point of claim, the insured person is no longer with us. Therefore, they want to know that payment will be made. This creates the need to speak with an advisor to build confidence in the insurance provider.
IoT is also playing a huge part in insurance, especially in the transport sector. This is the case whether it’s trackers in cars to monitor driving behavior or sophisticated technology on cargo ships to calculate risk factors including weather, risk of piracy, sea congestion risks, etc. This technology is enabling more dynamic insurance risk assessment and flexible policies in turn. Distributed Ledger Technology and Blockchain have a part to play in implementing the contracts that document these changes and also in the reinsurance workflow.
FinTech/ InsurTech companies are looking to help solve some of these issues for the traditional insurance firms but integration with and changes to legacy infrastructures are still necessary to ensure successful transformations. It is also paramount for traditional insurers to learn from InsurTechs by way of close partnerships. Simply acquiring or investing in a startup may not be enough to extract the maximum value from the InsurTech scene and make innovation part of business as usual. Changes in mindset and approach may be required.